Southeast Asia Must Build Its Own Strength, Not Choose Between US and China

Southeast Asia has built something substantial over the past three decades. The region's economies have grown nearly ninefold since 1998, reaching $4.5 trillion today. Yet that growth is no longer translating into the kind of prosperity it once promised. The middle class in Indonesia and other countries is shrinking, becoming financially fragile. Youth unemployment is rising, especially among university graduates. The jobs that once lifted families into stability are disappearing, replaced by gig work and precarious arrangements that leave people worse off despite the headline numbers looking strong.

The problem is structural. Southeast Asia has spent decades following a formula: attract foreign investment, provide cheap labor, export to wealthy markets, and hope prosperity trickles down. That model is exhausted. Aging populations, fragmenting global trade, and the rise of artificial intelligence are all pushing against it. Meanwhile, the region faces a choice that feels urgent but is actually a distraction. As the United States and China compete for technological dominance and AI supremacy, Southeast Asian governments are being pulled toward picking a side. The real opportunity, though, lies elsewhere entirely.

Instead of choosing between Washington and Beijing, Southeast Asia should focus on building its own technological capabilities. This does not mean competing to construct massive data centers or frontier AI models. It means applying technology to problems that actually matter: healthcare systems that reach rural areas, agricultural innovations that increase yields, education platforms that work offline, public administration that serves citizens rather than elites. Singapore demonstrates what this looks like—a city-state that built its own digital public services rather than importing them. Malaysia and other nations could follow that path, but only if they commit to technology as a tool for public good, not private extraction.

The deeper challenge is economic policy itself. Growth alone is not enough. The International Monetary Fund's September 2026 analysis makes this clear: despite steady expansion, people across Southeast Asia face high living costs and unstable work. Informal workers have no safety net. Entry-level positions that young people need to build experience are being automated away. A privileged few capture the benefits while the majority falls further behind. This is not inevitable. It is a choice about what policies governments prioritize.

Building a different future requires three shifts. First, education systems must do more than produce graduates. They need to partner with employers to teach practical skills, problem-solving, and digital literacy. Industries must offer lifelong learning and reskilling, including for older workers being displaced by change. Second, investment must be "better," not just bigger. This means deeper capital markets, stronger competition, and heavy spending on education. It means foreign factories that upgrade local skills and boost local suppliers, not just assemble products for export. It means developing domestic capabilities in regenerative agriculture, semiconductor design, renewable energy, and precision manufacturing. Third, energy security demands urgent attention. The rise of AI and data centers is driving electricity demand upward. Southeast Asia must embrace renewable energy and build regional power grids to avoid expensive, polluting imported fuels. A just energy transition would create green jobs in vulnerable communities.

None of this is possible for individual countries acting alone. The eleven members of ASEAN represent nearly 700 million people and one of the world's largest economies. Together, they can negotiate better deals on technology transfer. They can move faster on agricultural innovation, digital trade, AI safety standards, and green energy. Deeper partnerships with middle powers—Australia, Japan, India, the European Union—can strengthen supply chains without forcing the region into a binary choice between superpowers. This is what "developmental agency" means, a concept the IMF has emphasized to regional governments. Southeast Asia cannot control the US-China rivalry, but it can control its own domestic policies.

That control requires institutional strength and political will. Governments must be transparent and accountable. Industrial policies cannot become covers for protectionism or cronyism. Tax revenue must be raised fairly and spent on transitions that benefit the many, not the few. This is harder than it sounds. Many Southeast Asian governments still lack the tax revenue to fund the shifts they need. Raising domestic revenue is difficult, politically fraught, and unglamorous. Yet without it, the privileged will continue to capture growth's benefits while everyone else watches from outside. The region's true strength will not come from serving as a passive arena for superpower competition. It will come from building resilient economies, creating quality jobs, and forging a united, independent regional identity.